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Formula, in Pricing Strategy

SaaS Pricing Formula

This SaaS pricing tool sets a monthly price floor by taking the higher of two requirements: the margin your COGS demands, and the price needed to pay back CAC within your target window.

5 variables. Published Mar 12, 2026. Updated Mar 27, 2026. By AI Biz Hub.

Formula
Recommended Price = max( Margin Floor, Payback Floor ), where Margin Floor = COGS per User / (1 - Target Gross Margin) and Payback Floor = COGS per User + CAC / Target Payback Months

Variables

RP

Recommended Price

The higher of the margin floor and the payback floor, in currency per user per month. A floor to compare against value-based and competitor pricing.

CPU

COGS per User

Monthly cost to serve one user, in currency units. The base both floors build on.

TGM

Target Gross Margin

The gross margin you want to hold, as a percent. It sets the margin floor: COGS divided by one minus the margin.

TPM

Target Payback Months

Months allowed to recover CAC through price above COGS. Fewer months raises the payback floor.

CAC

Customer Acquisition Cost

The cost to acquire one customer, in currency units. Spread across the payback window, it lifts the payback floor.

Step by step

  1. 1

    Set the baseline case with the real calculator inputs.

    Cogs Per User = 28, Target Gross Margin Percent = 80.0%, Target Payback Months = 8, CAC = $450

  2. 2

    Compute the margin floor first: divide COGS per user by one minus the target gross margin, so price covers cost at the margin you need.

    COGS of $28 at an 80% target margin gives a $140 margin floor (28 / 0.20).

  3. 3

    Apply the formula and read the first calculator outputs, not just the headline assumption.

    The calculator lands with recommended monthly price at $140 and margin floor at $140.

  4. 4

    Re-run with a tighter payback target or higher CAC to see whether the payback floor overtakes the margin floor.

    Cutting target payback from 8 to 3 months lifts the payback floor to $178 (28 + 450/3), which then sets the price.

Worked example

SaaS Pricing sample case

Cogs Per User

28

Target Gross Margin Percent

80.0%

Target Payback Months

8

CAC

$450

Margin floor = $28 / (1 - 0.80) = $140. Payback floor = $28 + $450 / 8 = $84.25. Recommended price = max($140, $84.25) = $140.

The calculator lands with recommended monthly price at $140 and margin floor at $140.

Common variations

Scenario variants are useful because fixed assumptions rarely survive contact with real life unchanged.
Use SaaS Pricing Strategy Calculator to compare the baseline result with one stressed case before relying on a single answer.

Run the numbers next

  • Run the Numbers Wholesale Pricing Calculator

    Set wholesale price, retail price, and MOQ revenue from unit cost and overhead using cost-plus, keystone, or target-margin strategies.

  • Run the Numbers Price Elasticity Calculator

    Calculate price elasticity of demand and see whether a price change grows or shrinks revenue.

Sources

  1. SaaS Pricing Models Guide , Chargebee
  2. How to Price Your SaaS (Baremetrics Academy) , Baremetrics

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